Putting aside the fight brewing between the states and the Commonwealth over public healthcare spending, there could be a silver lining for investors, says Chris Smith, head of healthcare and retirement property funds at Australian Unity Investments.
“As it becomes more difficult, and more expensive, for governments to fund growing healthcare needs, an increasing number of Australians will turn to the private sector to meet their health and medical needs.
“As a result, there will be even greater demand for private medical centres, private hospitals and other allied health facilities, which will drive up their property value.
“Investors in healthcare property may reap the benefit of this in terms of both capital value and income yield,” Mr Smith said.
He pointed to three main areas that are driving demand for healthcare services –population growth; the increasing proportion of the population that will live beyond 65; and the dramatic rise in lifestyle diseases, which are typically the result of tobacco use, poor diet and lack of exercise.
“There will undoubtedly be ongoing and growing demand for healthcare and medical services that Federal and state governments will increasingly face difficulties in funding.
“According to the 2014-15 Budget papers, 16.1 percent of Federal government spending is provided for health. With this forecast to increase considerably over the forward estimates, it is increasingly likely that governments will move to limit services and expenses provided from the public purse.
“The outcome is that we expect the usage of private hospitals and private medical facilities will continue to rise, and the increased demand will ultimately require more space to expanding existing facilities and build new ones.
“At Australian Unity Real Estate Investment, we are continually seeing opportunities to further invest in developing our existing healthcare property assets. Both the pace and frequency of these developments have picked up substantially over the past few years, and we expect more expansions in the future will play an increasingly important role in the delivery of community healthcare services.”
Mr Smith said that for investors, the opportunities are significant.
“We continue to see a lot of interest in healthcare investments by both on and offshore REITs and institutional funds, which is a good indicator of the strong outlook for the sector.
“With retirees looking for strong and consistent income streams as higher term deposit rates roll off, healthcare property is increasingly worthy of consideration in a well-diversified investment portfolio,” Mr Smith said.
Australian Unity Investments is the funds management arm of Australian Unity – a national healthcare, financial services and retirement living organisation. A mutual organisation operating for over 170 years, Australian Unity provides services to some 600,000 Australians, including 320,000 members.
Over the last 10 years, the Australian Unity Real Estate Investment team has become one of Australia’s premier unlisted, direct property fund managers. We currently own and manage more than 50 properties in the healthcare, retail and commercial sectors across Australia and have more than $1.6 billion in funds under management (as at 31 January 2014).
For more information contact:
Chris Smith, head of healthcare and retirement property funds
Australian Unity Investments.
Mob: 0418 379 763